July 27, 2010
LORELEI E. CANNATA; SANDRA E. COVINGTON; KIM SHUT; KATHLEEN CLARK; REGINA WENDE; FRANCES ORTIZ; JACLYN WRIGHT; BARRY R. POPE; EUGENE D. MILLER, III; LAZARO M. GERAITA; SHANNON BRADY; CHERYL BELLINE; ELEANOR M. WETZEL; CALVETTA BURNETTE; DEBRA J. BRIGHER; TRACEY CAMPBELL; LORI LA ROSA AND MAUREEN RUSH, PLAINTIFFS-APPELLANTS,
MARLTON VILLAGE HOMEOWNERS ASSOCIATION; MICHAEL CHERN; EILEEN COATES; MICHAEL TROSO; JOSEPH SAVOIA; BETH LUCIA; CARL REYNOLDS; FRANK VALLARI; AND RUTH BOTTO AKA FAYE BOTTO, DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Chancery Division, Burlington County, Docket No. C-180-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 4, 2010
Before Judges Axelrad and Sapp-Peterson.
Plaintiffs appeal the denial of their application for counsel fees following the settlement of their claim against defendants. The Law Division judge denied their application, finding that damages and legal costs had not been raised and not included as part of the agreement to settle the matter. The judge additionally concluded that the "record had not been sufficiently developed by the time of settlement to demonstrate that those claims fall within its scope[,]" and even assuming that plaintiffs' claims fell under the "auspices of the LAD,*fn1 the record does not clearly indicate that they were the prevailing party." We affirm.
Plaintiffs are a group of homeowners who filed an order to show cause (OTSC) and verified complaint in the Law Division against the Marlton Village Homeowners Association (Association) and certain of its board members and management personnel, alleging violations of the LAD and the due process and equal protection guarantees of the New Jersey Constitution, N.J. Const. art 1, ¶ 1, arising out of a resolution the Association adopted placing a total ban on the use of scooters, skateboards and skates in their residential community. The Association did not respond to the OTSC but agreed to a temporary injunction and then participated in negotiations facilitated by the Chancery Division judge. As a result of those negotiations, the parties agreed to a settlement proposal submitted by plaintiffs' counsel and a superseding resolution that modified the restrictions. The Association adopted the new resolution. The trial court later granted plaintiffs' motion to enforce the settlement and incorporated the resolution into the agreement. Plaintiffs then moved before the trial court for counsel fees. The court denied the motion, finding that "[p]laintiffs' claim under the LAD is an improper basis for such award of legal costs" and that the "equities of this case balance in favor of  [defendant[s], who [have] since settled the dispute . . . and have removed the impetus for the underlying dispute by adopting Resolution 2008-1." The ensuing appeal followed.
On appeal, plaintiffs contend that the failure of the parties to address the issue of counsel fees during settlement negotiations does not mean that their claim for counsel fees was waived. Additionally, plaintiffs urge that as prevailing parties who obtained all of the relief they sought, they were entitled to recover counsel fees as well as a fee enhancement.
Finally, plaintiffs urge that the trial court was without authority to "review the merits of a case which was resolved by a settlement order." We find none of these arguments persuasive.
New Jersey generally follows the "American Rule," which provides that litigants are responsible for their own counsel fees and costs, regardless of the outcome. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed. 2d 141, 147 (1975); DiMisa v. Acquaviva, 198 N.J. 547, 553 (2009). There are, however, recognized exceptions to this rule and the LAD is an example of one such exception. Under the LAD, "the prevailing party may be awarded a reasonable attorney's fee as part of the cost[.]" N.J.S.A. 10:5-27.1. However, because the award of counsel fees under the LAD is discretionary, the decision granting or denying the award of counsel fees will not be disturbed on appeal in the absence of a clear abuse of discretion. Rendine v. Pantzer, 141 N.J. 292, 317 (1995). See also Mandel v. UBS/PaineWebber, Inc., 373 N.J. Super. 55, 84 (App. Div. 2004), certif. denied, 183 N.J. 213 (2005).
Against this analytical framework, we address two questions. First, we must determine whether the record before the Law Division judge presented an exception to the "American Rule," and, second, if so, whether the trial court abused its discretion in declining to award counsel fees and costs. Because we conclude the factual record did not support the conclusion that the exception to the American Rule should be applied, we need not address whether the trial court abused its discretion in declining to award the relief sought.
In plaintiffs' complaint, plaintiffs sought relief based upon a claim of a violation of the LAD. Any recovery of counsel fees would be premised solely upon plaintiffs' recovery as prevailing parties under the LAD. Therefore, we reject as entirely without merit plaintiffs' claim that the court erred in considering the merits of their claim.
The essence of a claim brought under the LAD requires, as a threshold matter, proof of the existence of a protected class. N.J.S.A. 10:5-4. There can be no dispute that skateboarders, in-line skaters, or scooter drivers are not protected classes of persons under the LAD. Ibid. Plaintiffs argue, however, that the resolution is violative of the LAD because it discriminates against children and, as such, implicates the LAD's prohibition against familial status discrimination. See ibid.
There is no dispute that the resolution did not specifically target children, hence negating a claim of intentional discrimination. United Prop. Owners Ass'n of Belmar v. Borough of Belmar, 343 N.J. Super. 1, 47 (App. Div.), certif. denied, 170 N.J. 390 (2001; see also Arlington Heights v. Metro. Hous. Dev. Corp., 429 U.S. 252, 265, 97 S.Ct. 555, 563, 50 L.Ed. 2d 450, 464 (1977). Although an association resolution that has a disparate impact upon children could possibly give rise to a meritorious claim of discrimination under the LAD, on this record, we are in complete agreement with the Chancery Division judge that "it is not clear that [p]laintiffs would have succeeded on a[n] LAD claim if the case [had been] litigated."
The fact that skateboarders, in-line skaters or scooter drivers are more likely to be used by children than adults does not, on its face, establish disparate impact discrimination against children because the resolution did not prohibit these activities in all areas of the Marlton Village. The original resolution, known as Resolution 2007 - 01, expressly provided that "[s]kateboards, in-line skates and hard-wheeled scooters can be used in the driveway or within the property lines of the individual unit of a homeowner."
Moreover, Resolution 2008-01 modified Resolution 2007-01 but did not remove all restrictions related to skateboards, inline skates and hard-wheeled scooters:
Skateboards and in-line skates shall not be ridden upon or used on the following sections of the [c]ommon [a]reas: curbing, landscaped areas including grass, shrubbery, flower beds, etc. and the recreation area, inclusive of the swimming pool area and the recreation area parking lot and adjacent concrete walkways, when the pool is open.
Apparatus, ramps, pipes or any other accessory shall not be used for the performance of tricks, jumps or stunts on sidewalks or other [c]ommon [a]reas.
Likewise, accepting that plaintiffs are a protected class under the LAD's familial status category, the Chancery Division judge also properly found that "the record does not clearly indicate that they were the prevailing party." As noted earlier, the original resolution was modified but did not eliminate the restrictions plaintiffs challenged.
"A plaintiff is considered a prevailing party 'when actual relief on the merits of [the] claim materially alters the relationship between the parties by modifying the defendant's behavior in a way that directly benefits the plaintiff.'" Warrington v. Village Supermarket, Inc., 328 N.J. Super. 410, 420 (App. Div. 2000)(quoting Farrar v. Hobby, 506 U.S. 103, 111-12, 113 S.Ct. 566, 573, 121 L.Ed. 2d 494, 503 (1992)). The litigation must be "a catalyst that prompted defendant[s] to take action and correct an unlawful practice." Mason v. City of Hoboken, 196 N.J. 51, 74 (2008). That is, there must be "a factual nexus between plaintiff's litigation and the relief ultimately achieved" and the claim must have had "basis in law." Warrington, supra, 328 N.J. Super. at 421 (citing Singer v. State, 95 N.J. 487, 494-495 (1984)).
Plaintiffs contend they satisfied this test because they "obtained a court order enforcing a settlement which reverses defendants' ban on scooters, skateboards and skates." In other words, they "obtained the full benefit they were seeking." We disagree.
In their complaint, plaintiffs sought injunctive relief reversing the resolution's restrictions related to skateboards, skates and scooters. The settlement reached removed some of the skating restrictions -- for example, residents may now skate on paved roads in Marlton Village -- but other restrictions, such as the prohibition of skating on curbs or in the pool area, still remain. Further, there is no evidence that plaintiffs' lawsuit acted as a catalyst that prompted the Association to take action to correct an "unlawful" practice. Mason, supra, 196 N.J. at 74. Rather, an equally cogent argument can be made that the settlement represents the Association's business judgment to use its resources to negotiate an acceptable superseding resolution that addresses its legitimate objective to protect its residents against potentially dangerous activities while still allowing residents the opportunity for skating-type activities, albeit in a more controlled setting. Hence, the settlement was neither an admission that the original resolution deliberately targeted or disparately impacted a protected class or that the litigation was a catalyst for the modified resolution. Hence, plaintiffs did not recover any damages in the settlement. Consequently, even assuming plaintiffs are deemed members of a protected class under the LAD, we find no abuse of the Chancery Division judge's exercise of his discretion to deny an award of counsel fees. Because the record presents no exception to the "American Rule," the trial court properly denied a counsel fee award to plaintiffs.
In view of our determination that the record did not clearly establish that plaintiffs would have successfully maintained a cause of action under the LAD based upon familial discrimination and that the Chancery Division judge did not abuse his discretion in denying an award of counsel fees, we need not address whether plaintiffs were entitled to a fee enhancement.